How To Calculate Your Net Worth…

net-worth

image from http://www.toolsformoney.com/net_worth_calculator.htm

I lived a good portion of my life serving in the military and had no idea what my “Net Worth” even was, let alone how to go about calculating it. Now, I get the question all the time from my students and potential students. They ask me: “How do I figure out my net?” This is the blog post I’m going to start pointing out to people with this question. This quick, easy way to calculate your net worth as a real estate investor will be helpful to you as well.

Webster Definition of Net Worth:

**In business, net worth (sometimes called net ) is the total assets minus total outside liabilities of an individual or a company.**

Put another way, your net worth is simply what you own minus what you owe.

For a company, this is called shareholders’ preference and may be referred to as book value. Net worth is stated as at a particular year in time. In the case of an individual, the term estate is used in relation to deceased individuals in probate. For businesses, the term is used in the context of fraudulent law and on the dissolution of the company.

**In personal finance, net worth (or wealth) refers to an individual’s net economic position; similarly, it uses the value of all assets (long term assets) minus the value of all liabilities.**

Your Net Worth is not your bank account balance. Maybe you just said: “YES! I got a bonus today!” That’s great! But unfortunately, it’s not a truly a bonus until 100% of your liabilities and debts are paid.

Back in 2005, I had tons of liabilities: two cars, big house, credit cards, etc, etc… That was the time I decided to NEVER HAVE DEBT again. This was the beginning of my increasing net worth.

debt-to-income-ration

image from www.clearpointcreditcounselingsolutions.org

So, how did I get out of debt and stay there? I followed one simple rule: if I can’t pay cash for it, I don’t buy it. Debt is destroying this great country of ours, and I’ll be damned if I let it destroy me, my family, friends, or any of my amazing students. My cars are paid for. My house has 80% equity, meaning it’s ¾ paid off. I have ZERO credit card debt. 

So the simple way to do this is as follows:

  1. Take a sheet of paper and draw a T-Bar (Show picture of T-Bar)
  2. On One side, put (Total Debts) – everything you owe at this time.        
  3. On the other side, put every (Income Streams) – all revenue you have coming in.
  4. Then subtract (Total Debts) from (Income Streams) and that will equal your total NET WORTH.

 My cars are paid for. My house has 80% equity, meaning it’s ¾ paid off. I have ZERO credit card debt.

franklin and family at water park

Image from Franklin Cruz Fan Page (My Family 🙂

My kids will have their college funds taken care of. My assets are almost primarily liquid, which means I can access them at any time. I don’t have to wait for them in a pension. I don’t have to act as though I like my coworkers for another few years until I get my “retirement money.”

If I can do it, so can you!
Enough Waiting!

Thank you so much for sharing this content and liking it on Facebook. The only way I can bring you the best possible REI content tailor-made to answer your questions and solve your investing issues, is if you provide me with feedback! I need to hear from you! Let’s continue this conversation. Don’t be shy! Did you calculate your net worth? It all starts with eliminating debt. What other real estate investing topics would YOU like to read about?

Summary

I get the question all the time, from my students and potential students: “How do I figure out my net?” This is the blog post I’m going to start pointing out to people with this question. Hopefully this quick, easy 3-step way to calculate your net worth as a real estate investor will be helpful to you as well.

Stay blessed, friends. Here’s to your success with real estate investing.

Respectfully,
Franklin A. Cruz

 

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